Companies, particularly public companies like Microsoft, need to grow.
Investors that put money, or buy shares, in a business want to make money on their investment.
And for that to happen the company’s ‘value’ needs to go up.
It needs to grow bigger.
This may sound obvious, but we’re about to get into whyXbox just closed three Bethesda studios.
And it’s important to keep in mind that focus on growth.
With the backing of Microsoft’s senior management, Xbox decided to try and change the game.
Central to this was its Game Pass subscription business.
And not just for itself, but the entire games industry.
So it started to spend money picking up studios and franchises.
This was all in service of creating a ‘regular cadence of content’ into Game Pass.
And for those territories, it would need to find games suited to the tastes of those players.
Microsoft’s acquisitions would continue, eventually leading to that huge $69bn deal for Activision Blizzard.
Microsoft likes to adopt a ‘limited integration strategy’ when it comes to buying things.
To be fair, this growth situation wasn’t just an Xbox problem.
These games are also hard to monetise outside of Game Pass.
And that includes the UK, where Xbox has a reasonable audience.
In other words, these games are selling fewer units as a result of being in a subscription service.
These are the ‘high impact’ games that are most likely to drive people to the service.
To properly succeed as a third-party publisher also requires big hit games.
There’s a reason Bayonetta didn’t work for Sega but does for Nintendo.
It all comes back to that growth.
But the numbers are not going up.
‘What parts of our business isn’t supporting that?’
And ‘Should we be investing in something else instead?’
Put simply, Xbox bet an obscene amount of money on a future that hasn’t happened.
The market has shifted under its feet and it’s having to alter direction.
And some of its teams are having to pay the price.
Christopher Dring runs GamesIndustry.biz, Eurogamer’s sister publication all about the business of video games.
